NEW YORK (CNNMoney.com) - Last week all three major U.S. stock gauges hit lows for 2006 - and then posted the biggest gains in years.

The challenge facing investors is this: Did the two-day rally last week mark an end to over a month of down trading, or was it just a momentary breather in a broader bear market?

Stocks sold off early in the week, but then mounted a late-day rally Wednesday and surged Thursday, with the Dow Jones industrial average posting the biggest point and percentage gain since April 2005, according to Jeff Hirsch of the Stock Trader's Almanac.

The tech-fueled Nasdaq recorded its best percentage gain in over two years, and the biggest point gain in over three, while the S&P had its best gains by both measures in over three years.

But stocks zigzagged Friday leaving investors wondering if the market's long slide over the last several weeks had finally come to an end or if stocks would continue bouncing along the bottom.

"I think the selloff was somewhat overdone," said Michelle Clayman, Chief Investment officer at New Amsterdam Partners. "The economic backdrop is still pretty good."

But that doesn't necessarily mean the selloff is over.

"Near term, the market doesn't feel like its put in a bottom," said Barbara Marcin, a fund manager at Gamco. "I think we'll drift around down here for a little bit."

In addition, 11 S&P 500 companies are on tap to report second-quarter earnings this week, including investment bank Morgan Stanley (Charts) and delivery firm FedEx (Charts), which could provide some market direction. (See chart for details.)

This week is light on key economic reports, but investors will be closely watching May readings on housing starts and durable orders. (See chart for details.)

The latest consumer inflation report cemented expectations that the Federal Reserve will raise the target for its short-term interest rate when it meets June 28-29.

Now, there's discussion about what Fed policy-makers plan to do with rates after that hike, and all economic reports next week will be scrutinized for answers to that question - as will any comments from Fed members.

Federal Reserve Bank of Cleveland President Sandra Pianalto, a voting member of the central bank's policymaking committee, is set to deliver opening remarks at a banking conference Thursday.

Pianalto is one of several Fed officials to spark inflation worries recently. She said last week that she was troubled by inflation and that the inflation picture exceeds her comfort zone.

Stock investors don't like higher interest rates because they ultimately slow the flow of money through the economy and put the brakes on corporate profit growth, thus making stocks less appealing.

After 16 straight quarter-percentage point rate hikes over the past two years, the central bank's target for its fed funds rate, a key overnight bank lending rate, stands at 5 percent.

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